Financing the Climate-Change Transition

Government funding alone cannot bring about a clean-energy economy, so the financial sector must help fill the gap. By redirecting capital flows toward proactive efforts to mitigate and adapt to climate change, financial institutions can protect client assets, while preserving the planet for future generations.

POTSDAM, PARIS, ZURICH – Unless the world reduces greenhouse-gas emissions rapidly, humanity is likely to enter an era of unprecedented climate risks. Devastating extreme-weather events are already increasing in frequency, but much of the worst climate-related damage, such as a sustained rise in sea levels, will be recognized only once it is too late to act.

Clearly, the climate system’s time horizon does not align well with the world’s much shorter political and economic cycles. Listed companies report on a quarterly basis, and recent regulatory changes, such as those mandating increased use of mark-to-market accounting, limit long-term thinking.

Governments usually have legislative cycles of no more than four years, and they must also respond to immediate developments. Yet stabilizing the climate requires sustained and consistent action over an extended period.

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